NIKE CASE STUDY

Name:
| Strategic Analysis Methods and Tools | September 2016

Contents
I.

NIKE OVERVIEW......................................................................................... 3
1.

History of Nike........................................................................................ 3

2.

Mission and Value................................................................................... 5

3.

Competitors............................................................................................ 5

4.

Products.................................................................................................. 5

II.

PESTLE ANALYSIS....................................................................................... 6
1.

Political factors....................................................................................... 6

2.

ECONOMIC FACTORS............................................................................... 6

3.

SOCIAL Factors........................................................................................ 6

4.

TECHNOLOGICAL FACTORS.....................................................................6

5.

LEGAL FACTORS...................................................................................... 6

6.

ENVIRONMENTAL FACTORS.....................................................................6

III.

SWOT ANALYSIS...................................................................................... 7

IV.

PORTERS FIVE FORCES ANALYSIS...........................................................7

1.

THREAT OF ENTRY................................................................................... 8

2.

THREAT OF SUBSTITUES.........................................................................8

3.

POWER OF BUYERS.................................................................................8

4.

POWER OF SUPPLIERS............................................................................. 8

5.

COMPETITVE RIVALRY.............................................................................8

V.

BUSINESS MODEL CANVAS (question 5 - Ian).............................................8

VI.

COMPANYS STRATEGY (question 6 Linh)..............................................8

VII.

BCG MATRIX (question 8 Jenna)...........................................................8

VIII.

VALUE CHAIN ANALYSIS (question 6 Tif)...............................................8

IX.
COMPETITVE ADAVANTAGE (question 4 Anu) and prove by financial
indicators......................................................................................................... 8

PAGE 1

NIKE OVERVIEW

1. HISTORY OF NIKE

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Image
Nike was founded in 1964 by track coach and runner duo Bill
Bowerman and Phillip Knight as Blue Ribbons Sports, later becoming
Nike, Inc. in 1978. The name Nike was chosen in reference to the Greek
Goddess of victory.
Headquartered in Portland, Oregon, the sportswear and equipment
supplier made $16 billion in revenue in 2007, up from 9.2 billion in
1997. Nike currently employs 30,000 people worldwide.
Nike sells products under Nike, Inc., Nike Golf, Nike+, Nike Pro, Nike SB
(Skateboarding), Air Jordan, and Team Starter, with subsidiaries Cole
Haan, Umbro (since 2007), Converse, and Hurley International. Nike
has come a long way from when its founders used to sell the shoes out
of the trunk of their cars until the first Nike store was built in 1966.
Now Nike products are sold in numerous shoe and apparel stores
worldwide as well as in specialty Niketown stores and online
at Nike.com.

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Nike sells clothing and equipment for sports like Track and Field,
Football, Baseball, Soccer, Tennis, Cricket, Basketball, and
Skateboarding. Nike has numerous websites dedicated to each of their
target audiences
including Nikebasketball.com,Nikerunning.com and Nikefootball.com.

2. MISSION AND VALUE

The vision is to help NIKE, Inc. and our consumers thrive in a
sustainable economy where people, profit and planet are in balance.
The values through the vision: We could observe according to the
vision statement of Nike that they gave a large importance to the
participation of their customer in the achievement of their goal. This
leads to show how valuable are the customer for the brand. Nikes
goals are the clients goal and Vis versa, so there is the image of an
invisible partnership with common interests between Nike and their
consumers. Afterwards Sustainable economy where people profit and
planet are balance thus this passage demonstrate the interest of Nike
to implement and apply a sustainable economy which would be benefic
for everyone
The missions: to bring inspiration and innovation to every athlete in
the world. If you have a body, you are an athlete.
This mission conveys very positive values: Inspiration, innovation,
To every athlete in the world
The idea of inspiration, shows NIKEs will to be an example, and
inspiration and a leader to every athlete of the world to success. It is
a very positive, energizing value, inspiring people to find motivation
and go further by adopt a winner mindset.If you have a body, you
are an athlete & the companys slogan JUST DO IT represents this
inspiration goal..
The idea of innovation shows they will continuously research the
improvement of their products.
And finally if we come again to the end of the quote to every athlete
of the world we see that they clearly target to the whole world that
gather there value of the winning mindset
So to make it short, the values that Nike brings are also the most
important values in the sportive field which are: TEAMWORK, FAIR
PLAY, and THE COMPETITION and WINNING SPIRIT.

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3. COMPETITORS
Nike Incs industry is highly competitive. The footwear, sport
apparel and equipment markets are very crowded and Nike has to
compete with many other internationally famous companies like
Adidas, Puma or Under Armor as well as with umbrella corporations
that owns a large number of brands in one or several of Nikes
markets, like VF Corp.
To get an edge in this tough battle for market share, Nikes
strategy consists in relying heavily on marketing, sponsoring and
endorsement deals. Nikes TV ads are usually long, well-thought, welldirected and often feature famous and popular athletes who are paid to
show their support and dedication to the brand. The same athletes
have to wear Nike products at games and during practice and promote
the brand and its new products on social media. It is a very effective
way to turn views and clicks into sales, the athletes chosen by the
brand are considered by many as role models, sometimes even folk
heroes for superstar such as Cristiano Ronaldo, LeBron James or
Michael Jordan who are known for their close relationship with Nike.
Their influence and reach on people is global and their use of Nikes
product has a direct impact on the potential customers behavior. This
strategy is what gives Nike an edge over smaller yet important
competitors in the likes of Under Armor, Reebok and Puma. However,
Nikes main rival, the German brand Adidas, using the same very
successful strategy gives the American company a run for its money.
The two companies target the same consumer base and deliver
relatively similar products in terms of price and quality. They have also
been fighting for a long time, which means both companies are as
famous as each other and they always seem to be natural competitors.
Lots of their customers developed a solid loyalty to one of the two
brands and wouldnt switch no matter what. Others will buy one or the
others apparel or footwork because of a personal preference, for
instance people living in Paris might be more willing to buy Nike gear
because the company sponsors the PSG while people living around
Marseille might consider Adidas more because of its ties with the
Olympique de Marseille. Recently, Adidas started a collaborative line
with American artist and pop icon Kanye West. In the style of what Nike
is doing with its Air Jordan collaboration with NBA legend Michael
Jordan, Adidas launched a new side brand called Yeezy. But when Nikes
Air Jordan is clearly a sportswear line, Yeezy is all about fashion and
modernism. This innovative and trendy work alongside someone whos
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not sports related at all is a first and has had a very positive impact on
Adidas. There is no doubt Nike is already working on a way to counter
this small change in Adidas strategy and that the two brands will keep
competing hard for domination of the markets they share.
In addition to the tough competition against its traditional
competitors, Nike also has to face another type of competition:
counterfeited fakes. Mostly originating from China or from South-East
Asia, these fake Nike shoes are almost identical to the real ones, but of
lesser quality and for a much cheaper price. With the arrival of the
internet and the development of online shopping, these counterfeited
products became widely available which makes it a huge concern for
Nike. The American brand is indeed one the most counterfeited
companies in the word and its most important market, the footwear
market is the most counterfeited market in the world. What is even
more concerning is the fact these fakes are trending and there is no
sign of it slowing down. Each pair of counterfeited footwear sold equals
to a pair of real Nike footwear staying on the shelves and in the end, it
represents a major loss for the company. Even though laws in western
countries prohibit the production and distribution of such counterfeited
goods, the Chinese and South-East Asian markets, where the
counterfeited products are originating from, are so large and so many
tourists are traveling there every year that stopping the fake shoes
trade is pretty much impossible. It is therefore a competition Nike will
have to face in the future and that could be very threatening to its
business in the long term.

4. PRODUCTS
I.

PESTLE ANALYSIS

1.

POLITICAL FACTORS

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2.

ECONOMIC FACTORS

In this market there is a high presence of the competitors and for

some years the presence of local firm has increased in lands such as
China.
As Nikes products are manufactured in Asian countries, the firm as
a little control on the quality of his production.
Nike has based his product on a Premium Pricing Strategy, having
this kind of strategy is targeting a group of customers so the
company isnt accessible for everyone.

3.

SOCIAL FACTORS

There are different social trends that could have a lasting impact
on Nike. As a company surrounded by a lot of hype and attention,
Nike could benefit from the recent concept of sneaker collection.
This trend that developed around social media blends photography,
fashion and picture sharing. Three hot subjects all at once, this
social trend actually represent a niche market for the company as
Nike is one of the most beloved brand for Sneakerheads, thanks to
the popularity and longevity of the lines Air Max and Air Jordan.
During the 2000s, people all over the world started to become
more and more health conscious. In addition to good nutrition,
people increasingly subscribe to gyms or go out for long runs. This
surge in sporting activity is not only healthy but also very profitable
for a company like Nike. The companys sports equipment, apparel
and shoes sales are all on the rise and the boost can be mostly
attributed to this social trend.
It is important to note however that some social trends affects
Nikes business negatively. With the overall increase in social
awareness in the United States and in Europe, the scandalous
working conditions in Nikes factories lead to the company receiving
lots of criticism. Nike has been blamed for years for having been
using child labor in their Asian factories. To face the public critics,
Nike vowed to better the working conditions of its factories and to

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treat the workers with dignity, but the conditions in which Nikes
products are manufactured is still highly debated.

4.

TECHNOLOGICAL FACTORS

Nike invest lots of time and money in his R&D, the firm has the
biggest budget compared to his concurrent and buy a big number of
patents, to not lose money they have be very good in their
development.
Thanks the innovation and new technology on the digital, Nike
increased his development because customers used the online
market and the presence of the brand on the social media helped
them to grow.

5.

LEGAL FACTORS

6.

ENVIRONMENTAL FACTORS

The judicial system, consumer rights, trade treaties, and ethical

codes are all legal that affect Nike.
One of the serious legal related issue Nike needs to deal with is the
issue of counterfeit product. Nike has to ensure to prevent fake Nike
product to keep their reputation, avoid lawsuits which can increase
the legal cost of the company and protect the Nike brand.
In an Indonesia factory, Nike has to pay 1 million dollar overtime to
4500 workers to settle between workers union and factory
settlement due to the fact that they did not pay more than 500,000
unpaid overtime hours that sewing Nike workers did over the past 2
years in 2012

Shoe manufacturing is a big threat for health and environment, as

many chemical, and fossil fuels are used, produced and leaked into
the environment during all the lifestyle of the shoe. These products
are harming both wildlife and humans. The carbon dioxide release in
the shoes making factories enlarges the greenhouse effects so they
have to reduce their energy consumption. Low about the recycling
of the wasting products.

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II.

SWOT ANALYSIS

STRENGTH

WEAKNESS

Swoosh is instantly

recognizable
Good supply chain >high
quality/low prices
Sells in more than 180
countries
They have their own outlets
and stores
Strong r&d
Evolving and innovative
product range
Large variety of sport
Strong customer
relationship

Selling through retailers

Overseas manufacturing
dependency

High prices of the product

compared to some competitors

They dont have their own factories

Image that is related to the labours
right/low cost wages

OPPORTUNITIES

THREATS

New product development

possibilities
New high value product line
Sells in more than 180
countries
Sponsoring deals and
endorsement deals
Sneakerheads niche market
Blend fashion and sport
together
Expansion to emerging
markets

Currency exchange rate risks

Highly competitive market
Relying heavily on consumers
discretionary income
Too dependent on its footwear
sales

OPPORTUNITIES
There are a lot of opportunities for Nike to seize. Footwear and
sports apparel are two markets in which there is room for evolution and
innovation. With the help of its strong research and development
department, Nike has been innovating for years and is known as a
trend setting company. Today, there is still a tremendous amount of
new product development ideas to explore. Year after year, Nike has
the possibility to reinvent or revisit its traditional lines, bring oldies

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back to life or simply come up with a new product. A constant change

helps generate buzz and focus the attention on the brands newest
releases.
Thanks to its sponsoring deals, Nike also has the chance and
responsibility to come up with new uniforms every year for many sport
teams. The most dedicated fans will buy one or two every new season.
As the number of existing teams is enormous, Nikes jersey sales are
constantly high. Nike must target and sign the right teams as good
results have a direct effect on sales. Nike can also develop
partnerships to sponsor national teams and take advantage of peoples
patriotic spirit to generate revenues. In 2011, Nike replaced Adidas as
the official sponsor of the France national football team. Frances good
results in the last world cup and even better results at home in the
2016 UEFA European Championship sparked a peak in interest in the
team and boosted jersey sales, thus giving Nike an advantage over
Adidas on the football jersey niche market. These kinds of
opportunities will exist as long as football does so Nike can keep
exploiting them to generate sales and profit.
Recently, a new niche market has developed and Nike is bound
to be the prime beneficiary of its creation. More and more people begin
to collect shoes and some rare models can be found at incredibly high
prices on the internet. The day of a new Air Jordan release, people line
up and queue for hours with the hope of being one of the first to own a
pair. These passionate customers, often referred to as Sneaker
Addicts or Sneaker Heads can buy hundreds of different pairs. Nike
could favor from this trend by releasing more and more exclusive
models or limited editions, therefore allowing them to garner media
attention and receive lots of publicity after every releases.
Nike also has the opportunity to establish itself even more as a
trend setting company by blending fashion and sport to an even
greater extent. Just like what Adidas did with its Yeezy collaboration
with Kanye West, Nike could develop yet a new line that would keep
the brands vibe but that would really dig into high fashion and novelty.
By trying to come up with a more high-end, luxury affiliate brand, Nike
could open itself up to a new market full of possibilities. Nike could also
try to explore other kinds of high-value items like watches, sunglasses
or jewelry.

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Finally, like many other businesses, Nike could expand its

operations in emerging markets, for instance by opening more Nike
stores in newly industrialized countries instead of only relying on online
and retail sales. The opening of Nike store is always quite an event for
a town and it could boost local sales and increase the companys
visibility in the area.

THREATS
A number of variables could also have a negative impact on the firms
business and should be considered as threats.
First of all, Nike operates in a highly competitive market and the
companys tough competition means that whatever little missteps Nike could
make would have a major impact on the companys sales. Alternatives to the
brand are plentiful and as the markets leader, people expect a lot more from
Nike than from some of its rivals. Even if as of today, Nike is on top of its
competition, it still has to face a lot of pressure and must make sure it wont
fall off track because of a single fail.
Nike is also exposed, just like any other multinational businesses, to
currency exchange rate risk. The factories where the products are assembled
are mostly located in China and in South-East Asia, but more than half of
Nikes profit comes from the United States. Nike has important sales numbers
in Western Europe too. All these different geographic areas are important to
Nikes financial well-being, and change in the exchange rate between, for
instance, the Chinese Yen, the European Euro and the American Dollar could
end up costing Nike some of its profit.
Another possible threat to Nikes revenues is that the company,
because of its markets, is mostly if not only aiming at peoples discretionary
income. Nikes products are not necessities and are far from being the
cheapest in their market. In case of an economic downturn or mass
unemployment, people would prioritize their spending and Nike would lose
customers and sales.
The last important threat to Nike is the companys dependence on its
footwear sales. Indeed, even though Nike operates in many different markets,
the great majority of the companys revenues originate from footwear sales.
If something was to happen to the footwear market, like the arrival of a
polarizing newcomer or if Nike was to ever fall off and lose their magic touch
that makes their shoes so popular, the entire company would suffer and it
could compromise its activity in all the other markets.

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III.

PORTERS FIVE FORCES ANALYSIS

Porter Five Forces

Intensity

Competitive Rivalry Within The Industry

High

Bargaining Power Of Customers

Low To Medium

Threat Of New Entrants

Bargaining Power Of Suppliers

Low

Threat Of Substitute Products

1.
2.
3.

THREAT OF ENTRY
THREAT OF SUBSTITUES
POWER OF BUYERS

4.
5.

POWER OF SUPPLIERS
COMPETITVE RIVALRY

In the sportswear sector there is a high competition, like for example Adidas, Puma or
Reebox Moreover, the competition increases in Europe & China with some new local
competitors like in China with the firm Anta.

Questions:
Conduct an assessment of the external environment of the company selected, using
a tool of choice among the ones reviewed during the course. Outline which macrotrends

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may be relevant in terms of risks and/or opportunities for the company

Define the industry in which the company operates and analyze its profitability
using Porter's 5 Forces framework
Provide a brief description of the companys purpose and culture
Assess the performance of the company in relation to that of its competitors,
spelling out differences in price position and cost structure and determining if/who
has a competitive advantage within the industry. Select one or more key operational
and financial indicators to substantiate the performance analysis.
Analyze the company's current business model using the Business Model Canvas
Analyze the company's customer segment(s), its value proposition, and explain
which strategy is the company pursuing to create value for their selected clients
Analyze the company's value chain and compare it with that of its competitors. Look
for sources of competitive advantage. Identify the company's core competences.
If the company runs multiple strategic business units (SBU) apply tools such as BCGMatrix
to define their potential. Briefly describe the companys corporate strategy.
Based on all the above summarize the companys current competitive position, its
future prospective profitability, and outline possible strategies to increase or
maintain its competitive strength.

IV.

BUSINESS MODEL CANVAS (question 5 - Ian)

V.

COMPANYS STRATEGY (question 6 Linh)

VI.

BCG MATRIX (question 8 Jenna)

VII.

VALUE CHAIN ANALYSIS (question 6 Tif)

VIII.

COMPETITVE ADAVANTAGE, prove by financial indicators. (question

4 Anu)

IX.

RECOMMENDATION (after the whole parts finish)

BIBLIOGRAPHY
1. Nike to Pay Indonesian Workers $1 Million, VOA news
http://www.voanews.com/a/nike-to-pay-indonesian-workers-1-million-137173608/150598.html
2.

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